Hong Kong stablecoin stocks slump after PBOC vows cryptocurrency crackdown

 

Beijing has reaffirmed its tough stance on virtual currencies, warning of a resurgence in speculative trading and vowing to stamp out “illegal activities” involving stablecoins.

The People’s Bank of China (PBOC) held a coordination meeting on virtual currency regulation on Friday with a coalition of top regulatory and law enforcement agencies, according to a statement released by the central bank on Saturday.

“Business activities related to virtual currencies constitute illegal financial activities,” the statement said.

“Stablecoins are a form of virtual currency, and currently cannot effectively meet requirements for customer identification and anti-money-laundering,” it added, warning that they posed risks of being exploited for illegal purposes such as fundraising fraud and unauthorised cross-border fund transfers.

The meeting included officials from 12 other departments, including the Ministry of Public Security, Central Financial Commission, Ministry of Justice and the China Securities Regulatory Commission. It noted that speculative activities in virtual currencies had recently resurfaced.

According to the PBOC statement, the authorities emphasised that these currencies did not have the same legal status as fiat currency and “should not and cannot” be used in market circulation, while vowing to quash related illicit activities.

Despite a blanket ban on the sector since 2021, bitcoin mining in the world’s second largest economy has seen an uptick this year, according to industry data, as miners exploit China’s abundant energy supply.

Beijing’s assertion of its hardline approach to virtual currencies comes as other governments move to formalise the role of stablecoins in the economy.

The European Union’s regulatory framework for stablecoins took effect in June last year, while the central bank of the United Arab Emirates approved a dirham-pegged stablecoin in December.

This year, strong stablecoin supporter US President Donald Trump signed the regulatory “Genius Act” into law in July, while Hong Kong’s Stablecoins Ordinance went live in August. In November, authorities in Japan signalled support for a project by the country’s three largest banks to jointly issue stablecoins.

Meanwhile, Beijing has maintained its cautious stance on decentralised virtual assets, channelling resources instead into promoting the adoption of its sovereign central bank digital currency, the e-CNY.

While the application of the digital yuan has been primarily domestic to date, Beijing has aggressively stepped up efforts to deploy it globally as a counterweight to dollar-denominated tokens.

Pan Gongsheng, the governor of the PBOC, last month reiterated warnings that stablecoins remained in their early stages, noting that speculation surrounding them could erode the monetary sovereignty of less developed economies.

Addressing the Financial Street Forum in Beijing, he also pledged to further optimise the digital yuan’s management system and support more commercial banks in joining the network.

In September, the central bank opened its international operations centre for the digital yuan in Shanghai. The new hub is tasked with promoting the use of the e-CNY in cross-border payments and overseas markets.

https://www.scmp.com/economy/china-economy/article/3334675/chinas-central-bank-vows-stamp-out-illegal-activities-trading-stablecoins